AOL goes “all in” on advertising

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Tim Armstrong, CEO of AOLAOL headlined the Ad:Tech media conference in San Francisco and opened the event this morning with a keynote by CEO Tim Armstrong, who announced that AOL is going “all in” (poker parlance), on advertising. Armstrong’s troubled past and shaky performance as CEO has many pundits questioning his moves, but through a series of strategic acquisitions, Armstrong is looking to lead the conversion of AOL ‘s primary business toward advertising.

Malcolm McLean, shipping innovator
Malcolm McLean, shipping innovator

The primary motivation, according to Armstrong, is to do to online advertising what Malcolm McLean did to shipping in 1953: use technology to mechanize it. McLean was in trucking, and when he saw the way that goods were shipped overseas, he realized a tremendous opportunity for his business and the industry. As the story goes, a vessel going from New York to Germany took 10 days to get there, but loading goods took 6 days and unloading them took 4, effectively doubling the transit time of many of the items. According to Armstrong, some 90% of advertising insertion orders come in to some publishers via fax still to this day, despite major advances in ad platform technology. So AOL is launching, later this year, 1 by AOL (I was unable to find this new platform online, so I apologize for not having a link to provide). The concept is to better connect publishers and advertisers and cut down on wasteful inefficiencies in the middle.

In theory, it sounds good, but the keynote presentation was very short on details, and the 1 platform was only announced to be launching sometime “later this year”. It had several media watchers wary in the audience that this might be just another of Armstrong’s distractions. Already in the news this morning, the move toward advertising for AOL was being questioned as perhaps just a reflection of a struggling company and a leader on the hot seat.

Armstrong, whose failed vision on Patch Media and $12.1 million salary has placed him in the crosshairs of investors seeking better returns on AOL stock, has come under fire for behaviors many believe to be unbecoming of a CEO. He famously blamed his decision to cut employee benefits (but not his own salary) on two women in his company who had “distressed babies” that cost the company millions. Armstrong publicly fired a creative director in what appeared to be a snap decision during a company meeting in front of 1,000 employees, for the transgression of taking a photo during the meeting. While he later apologized for the incident, it has led many investors to call for Armstrong’s head, given the lack of confidence many have in leaders who make rash decisions. Armstrong’s primary effort at AOL had been in the integration of Patch Media, which he founded and sold to AOL when he became CEO. Patch was a colossal failure, according to analysts at The Street, and what they call just another one of Armstrong’s rabbits he pulls from a hat that seem to lack cohesive vision and long term strategy and instead appear to be chasing hot trends and using acquisitions rather than providing strong strategic guidance.

Still, the concept of making online advertising more efficient seems sound. As a publisher who has never received a fax for an insertion order, but does understand that there are inefficiencies in play in the online advertising process, I believe the concept has merit. Whether the 1 platform is going to be a part of the solution or just another failed vision by Armstrong I’m not going to attempt to answer. Time, as always, will tell.

Photo from Matthew Hurst on Flickr Creative Commons

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